CANADA FX DEBT-C$ strengthens to 2-week high on data, China

Tue Jun 14, 2011 9:09am EDT
 
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   * C$ hits C$0.9700 to the U.S. dollar, or $1.0309
 * Bonds weaker as investors return to riskier assets
 By Solarina Ho
 TORONTO, June 14 (Reuters) - The Canadian dollar firmed to
its strongest level against the U.S. dollar since the start of
the month on Tuesday following positive North American data and
news out of China that soothed fears of a hard landing.
 Canadian industrial capacity use rose in the first quarter
as manufacturers showed renewed strength after a year of
slowing growth. [ID:nN14125114]
 U.S. retail sales fell less than expected in May, while
producer prices rose more than expected. Retail sales were
depressed by a sharp drop in autos due to parts shortages
following the Japan earthquake. Excluding autos, however, sales
rose modestly in May. [ID:nCAT005457] [ID:nN14189699]
 At 8:46 a.m. (1246 GMT), the currency CAD=D4 stood at
C$0.9700 to the U.S. dollar, or $1.0309, stronger than Monday's
North American finish at C$0.9768 to the U.S. dollar, or
$1.0238. This was the currency's best performance since June
1.
 China's inflation accelerated in May, prompting Beijing to
hike its reserve ratio for the ninth time since October, but it
did not raise interest rates as some feared.
 "Normally that's risk-off, and usually we see a bit of a
flight to the dollar on that, but instead today, it seems like
the market's ignoring that," said Steve Butler, director of
foreign exchange trading at Scotia Capital.
 "We've seen stock futures pointing in the right direction,
and with that Canada's doing a little bit better today ...there
definitely seems to be a bit more of a positive sentiment
today."
 A flurry of Chinese economic data, including inflation and
industrial output, suggested economic growth was slowing down,
but not too quickly, relieving concerns that the world's
second-biggest economy was heading for a hard landing.
[ID:nNL3E7HE05P]
 The major Canadian data this week, manufacturing shipments
data for April, due Wednesday, is expected to be weak due to
supply chain disruptions from the Japan earthquake.
 Canadian bond prices were weaker across the curve as the
positive sentiment sent investors back into riskier
assets.[US/]
 The two-year bond CA2YT=RR was down 7 Canadian cents to
yield 1.503 percent, while the 10-year bond CA10YT=RR lost 35
Canadian cents to yield 3.045 percent.
 (Reporting by Solarina Ho, Editing by Chizu Nomiyama)